Snapchat's flash is fading fast

Snap’s flash is fading fast in the heated race among social networks to add users.

A weak earnings report from the Snapchat maker yesterday validated analysts’ recent skepticism of the company’s ability to fend off rivals, especially the goliath Facebook and its photo-sharing network, Instagram. For the second quarter, Snapchat reported a net loss of $443 million — almost triple the loss from the year-ago period, and slightly wider than analysts expected, according to FactSet data.

Investors might normally excuse a little red ink at an upstart tech company. But, perhaps more ominously, Snap’s user growth was also slower than expected in the second quarter, up 4 percent to 173 million daily active users.

That compares to recent active-user growth of 17 percent a year at Facebook, based on its second quarter profit report. In particular, its Snapchat-like Instagram Stories feature, now has more than 250 million daily active users.

“The pressure from Instagram isn’t letting up,” said Debra Aho Williamson, principal analyst at the audience research firm eMarketer.

Other key facts:

• In after-hours trading, Snap’s stock tumbled almost 10 percent to trade around $13 a share following the earnings report. It could slide further in Wall Street’s regular session Friday.
• Since going public in March, Snap is down about 20 percent from its initial offer price of $17. That’s a dubious milestone in the world of tech IPOs, where investors look for rapid, steep growth.
• Snap’s report arrives as broader earnings season on Wall Street is winding down. More than 90 percent of Standard & Poor’s 500 companies have now reported second-quarter results. The profit reports so far show an aggregate gain of nearly 11 percent in net income from a year ago, according to FactSet.